Which of the following is an example of window dressing?
A)borrowing on a long-term basis and using the proceeds to retire short-term debt to improve the current ratio
B)offering discounts to customers who pay with cash rather than buy on credit and then using the funds that come in quicker to purchase additional inventories
C)using some of the firm's cash to reduce long-term debt
D)any action that improves a firm's fundamental, long-run position and thus increases its intrinsic value.

Question

Quizplus · Accepted Answer

Window dressing refers to actions taken by a company to improve its financial statements or ratios in the short term, often to make the financial health of the company appear better than it actually is, especially before reporting periods. Borrowing on a long-term basis to retire short-term debt is an example of window dressing because it can temporarily improve the current ratio (an indicator of liquidity), making the company appear more financially stable without actually improving its long-term financial health.

Which of the Following Is an Example of Window Dressing